Reinsurance Rates Need to Increase, Allianz Re Head Ahmed Says

By Oliver Suess -
Mar 21, 2012

Rates that primary insurers pay
reinsurers to help them shoulder risks for clients need to rise
following last year’s record catastrophe claims, according to
the head of Allianz SE (ALV)’s reinsurance arm.

“Pricing is in general not at the level where it should
be,” Amer Ahmed, who took over from Clemens von Weichs as chief
executive officer of Allianz Re at the beginning of this year,
said in an interview in Munich. “Customers have to accept that
if they want their reinsurers to offer a sustainable coverage,
they need to pay a fair price for that.”

Earnings of insurers and reinsurers were hurt last year as
near record-low interest rates cut investment income and claims
from natural disasters, including the earthquakes in Japan and
New Zealand and the floods in Australia and Thailand, exceeded
the previous high in 2005. Allianz Re, which gets about 80
percent of its business from other units of Europe’s biggest
insurer, posted an operating loss of 101 million euros ($134
million) last year after a profit of 355 million euros in 2010.

Allianz Re would expect a profit of 300 million euros to
400 million euros in a “normal year,” Ahmed said. “We even
have the opportunity to enhance that a little.”

Allianz Re, which gets most of its third-party business
from Asia, saw its combined ratio, a measure that compares costs
and damage claims with premiums earned, worsen to 108.2 percent
last year from 93.2 percent in 2010.

Adjustments Made

“In the January renewals, we made some adjustments,”
Ahmed said. “We are no longer carrying unlimited exposure like
we did in proportional reinsurance in Thailand last year.”

From August until November last year, Thailand’s worst
floods in almost 70 years killed more than 800 people, inundated
two-thirds of the country and disrupted output by manufacturers
from Western Digital Corp. to Honda Motor Co. Insurers and
reinsurers may face claims of about $10 billion from the
disaster, according to Munich Re, which estimated last year’s
insured losses from natural catastrophes at a record $105
billion.

Ahmed, who was born in Pakistan and holds British
citizenship, has worked for Allianz since 2002 and became chief
risk officer at the reinsurance unit five years ago.

Premium income at Allianz Re declined to 3.8 billion euros
from 4.3 billion euros in 2010 as a quote-share agreement ended
with Munich Re, the world’s biggest reinsurer.